Low Volatility Leads To High Volatility - Jeff Pierce

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I’m a swing trader of momentum stocks with a holding period of anywhere from a few hours to a few months. I run a number of screens to locate the strongest/weakest stocks out there, using technical analysis to determine my entries and exits. Trying to calculate the intrinsic value of stocks in... More

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Low Volatility Leads To High Volatility 0 comments

Mar 22, 2012 9:57 AM | about stocks: VIXY, QQQ, DIA

An interesting observation I noticed regarding the ATR on the general markets and the volatility index below - see how the ATR (average true range) on the 3 charts below have been getting tighter and leveling off. That means that the amount these charts are moving are lessening each day and the longer this goes on the more violent a move is going to be.
This doesn't say which way these charts are going to move but it suggests that a big move is coming and I don't think it's to far off when you figure how long this pattern has been forming. Given how stretched the markets are and how low, or complacent the VIX is, it's not hard to see a correction coming, along with a rise in volatility.

Stocks: VIXY, QQQ, DIA

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